European Commission Initiatives
Joint Industry Response to EU Commission's Proposal Regarding Incentives in the OTD Business Model
CMSA-Europe™, ESF, SIFMA and five other industry associations today submitted a letter to the European Commission on their recent proposal regarding incentives in the originate-to-distribute model and the provision of quantified risk retention regulation for credit risk transfer products. An excerpt from the covering letter:
"The BBA, CMSA-Europe, the EBF, the ESF, ISDA, IACPM, LIBA, and SIFMA (“the Associations”) strongly object to the European Commission Service’s alternative proposal to amend the Capital Requirements Directive (CRD) to address incentives in the “originate-to-distribute” (OTD) model. The new proposal aims to prohibit European investment in obligations where the originator or sponsor fails to retain a 10% interest in positions having “the same risk profile”. We agree with the Commission that there have been difficulties with certain loan origination practices, as well as weaknesses in risk management procedures at a number of financial institutions, but note that unprecedented credit market conditions have also played a critical role. We can appreciate the Commission’s motivation to increase industry and regulatory focus on some aspects of the OTD model. But the
Commission Services’ proposal has the following fundamental flaws..."
The covering letter, which summarises the industry's concerns, and the supporting annex which outlines these in full, is available as a single PDF document.
Find the EC DG Internal Market's "Second public consultation paper on possible changes to the Capital Requirements Directive".
Industry Announces Transparency Deliverable to the European Commission
On Wednesday 2 July 2008, the ESF, SIFMA ,CMSA and six other associations announced "Ten Industry Initiatives to Increase Transparency in the Securitisation Market" that have been delivered to the European Commission at the end of June. These industry-led-initiatives go beyond what was required in the ECOFIN request of October 2007, to demonstrate the securitisation industry's strong commitment to transparency. All of the documents delivered are available on ESF website. Included are the press release, an executive summary of the specifics of the ten initiatives, letters submitted to Commissioner McCreevy, the newly-expanded ESF Securitisation Data Report, the CRD Pillar 3 initiatives being led by five associations (excluding CMSA), and a wide variety of issuer and investor transparency initiatives. These include progress reports on five sets of completed or proposed industry principles/codes of conduct: ABCP issuer (final), draft RMBS issuer (thereafter consumer ABS, ILS, WBS issuer), CMBS issuer, CDO manager, and investor-side ABS credit assessment and valuations principles. Also included are an investor survey, data access and industry data portal initiatives, global data standardisation initiatives, new ESF directories for RMBS and CDO issuer/manager sites, definitions surveys, legal analyses for EU ABCP and term EU ABS, a legal disclosure survey, and two product-specific disclosure surveys. As you can see, our industry has taken an aggressive look at what can be done differently, to encourage the development of a more robust, more transparent environment and thus help rebuild investor confidence.
CMSA supported letters and documents in relation to the European Commission can be found below.
Press Release
Executive Summary of the Ten Industry Initiatives to Improve Transparency in the Securitisation Market (dated 2 July 2008)
Documents relating to the initiative on Increasing Transparency in Securitization
Market Activity - New Securitisation Data Report (Association leads: ESF, CMSA, ICMA,SIFMA,)
a. Letter to EU Commissioner McCreevy (dated 25 June 2008)
b. ESF Securitisation Data Report – Q1:2008
Letter to EU Commissioner McCreevy dated 25 June 2008 regarding documents relating to Issuer and Investor Transparency Initiatives
Issuer and Investor Transparency Initiatives, a full document containing all of the following items:
Page 34 - Progress Report on CMBS Issuer Disclosure and Transparency Principles
(Association Lead: CMSA)
Page 99 - Questionnaires for Development of Standardised Definitions for CMBS (Association leads: CMSA, ESF)
CMSA will keep members informed as there are further developments regarding these discussions with the European Commission and any resulting market initiatives. If you have any questions, please contact Jaymon Jones.
European Commission Seeks Action from Structured Credit Markets
A consortium of trade groups, including CMSA-Europe, has been having an ongoing dialogue with the European Commission (EC) as to possible ways to improve transparency in the structured credit markets. CMSA thanks the European Securitisation Forum for its leadership in this industry-wide effort.
The initiatives being discussed include enhanced disclosure of information on European bank securitisation exposures; a data report, which will provide information on the industry in a consolidated manner and make it easier for the political and regulatory community to monitor the industry; and an increase in the information to be provided to investors in securitised products. The content and specifics of these initiatives will evolve over time. As to transparency within the CMBS sector, CMSA-Europe's efforts in the development and expansion of our CMSA European Investor Reporting Package (CMSA E-IRP) will play an important part in these market initiatives.
Trade Associations submit Industry Commitments letter
A letter was sent to the European Commission on Friday 8 February 2008 regarding three important initiatives to increase market transparency. These initiatives were suggested by the European Commission, and are part of an active effort by the industry to proactively work with the political and regulatory community so as to prevent any sudden and potentially damaging regulatory action against our industry. We would like to thank our members for their commitment and continued efforts in these initiatives.